The International Journal of Logistics Management

Examining the role of stakeholder pressure and knowledge management on supply chain
risk and demand responsiveness
David E. Cantor Jennifer Blackhurst Mengyang Pan Mike Crum

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David E. Cantor Jennifer Blackhurst Mengyang Pan Mike Crum , (2014),"Examining the role of stakeholder
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Journal of Logistics Management, Vol. 25 Iss 1 pp. 202 - 223
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IJLM
25,1

202
Received 17 October 2012
Revised 10 March 2013
18 June 2013
Accepted 30 September 2013

Examining the role of stakeholder

pressure and knowledge
management on supply chain risk
and demand responsiveness
David E. Cantor and Jennifer Blackhurst
Department of Supply Chain and Information Systems, Iowa State University,
Ames, Iowa, USA

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Mengyang Pan
Department of Management Sciences, The Ohio State University, Columbus,
Ohio, USA, and

Mike Crum
Department of Supply Chain and Information Systems, Iowa State University,
Ames, Iowa, USA
Abstract
Purpose The purpose of this paper is to contribute to the supply chain risk management literature
by examining how stakeholders place pressure on the firm to engage in risk management activities.
Design/methodology/approach This paper utilizes a survey approach to test the nomological
model. The analysis was carried out using structural equation modeling techniques.
Findings The results demonstrate that stakeholders place pressure on the firm to mitigate risk and
that knowledge management (KM) and joint planning activities with suppliers serve as mediating
roles in the model. The process-oriented model reveals that these factors influence the firms ability to
be responsive to customer demand.
Originality/value The research represents one of the first papers to empirically test how
stakeholder theory and KM contributes to risk mitigation activities. Additionally, the paper shows
the impact of KM factors on risk mitigation activities. The paper attempts to explain from both a
theoretical and empirical perspective how and why firms are engaging in risk mitigation activities
and how the impacts demand responsiveness.
Keywords Risk management, Stakeholder pressure, Joint planning
Paper type Research paper

The International Journal of Logistics

Management
Vol. 25 No. 1, 2014
pp. 202-223
r Emerald Group Publishing Limited
0957-4093
DOI 10.1108/IJLM-10-2012-0111

1. Introduction
Todays supply chains are under intense competitive pressure and face high levels
of supply chain risk. Because of the complexity and uncertainty associated with
managing supply chain partners and processes, the potential for supply chain risk
has increased in recent years (Pettit et al., 2010; Knemeyer et al., 2009). Thus, firms
are faced with the challenge to mitigate supply chain risk (Blackhurst et al., 2011;
Braunscheidel and Suresh, 2009). There is, therefore, a burgeoning amount of
interest in examining how firms can develop effective supply chain risk mitigation
strategies.
Firms can utilize a variety of approaches to plan for and mitigate supply chain
risk. Many firms leverage their knowledge management (KM) capabilities to mitigate
supply chain risk. Indeed, there is growing interest on the role of KM in the field
of supply chain management. A firms KM capabilities can enable the organization to

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mitigate a disruptive event (e.g. parts not being delivered due to a supplier strike) or
uncertainty (e.g. parts not being delivered in the expected time frame) in the
supply chain. Our study builds upon prior supply chain risk and KM research.
For example, Hult et al. (2007) showed how KM can play a critical role in reducing
lead time uncertainty in the supply chain. Hult et al. (2004) linked knowledge
development to supply chain cycle time where the supply chain members are
integrated strategically. Moorman and Miner (1997) found that an organization can
enhance short-term financial performance of new products by having higher levels of
knowledge and greater dispersion of that knowledge allowing the firm to reduce
uncertainty and risk in the supply chain. Craighead et al. (2009) showed that the KM
capacity in a supply chain has a positive influence on a firms responsiveness to the
external environment.
The firm can also leverage its joint planning activities with the supply base to
mitigate supply chain risk. Previous joint supply chain planning research has provided
initial insight into the mechanisms through which joint planning with suppliers may
mitigate risk in the supply chain. First, trust and commitment, attained in an
integrated relationship, contributes to a reduction of opportunism from suppliers and
the willingness of suppliers to coordinate activities with their customers along the
supply chain (Pettit et al., 2010; Primo, 2010; Richey, 2009). Kovacs and Tatham (2009)
discovered that strong relationship management enhanced immediate response
for humanitarian organizations despite a lack of physical capital resources. Second,
effective sharing and using information and knowledge in an integrated supply chain
strengthens a companys capability to evaluate partners and react to disruptions
(Prahinski and Fan, 2007; Richey, 2009). Third, risks are mitigated by improved
teamwork, knowledge sharing, and joint problem solving in an integrated supply chain
(Cheng, 2011; Braunscheidel and Suresh, 2009; Primo, 2010). Treleven and Schweikhart
(1988) describe how risks can be mitigated through improved sourcing strategies
with their suppliers.
Firms are pressured by stakeholders to invest in KM to mitigate supply chain risk.
Stakeholders in a supply chain may be defined as any individual or group who can
affect or is affected by the achievement of an organizations objectives (Freeman, 1984;
Donaldson and Preston, 1995; Phillips et al., 2003; Sarkis et al., 2010). Supply chain
stakeholders include clients, shareholders, employees, and NGOs/society (Sarkis et al.,
2010). Stakeholder may exert influence and control over a firm if that stakeholder has a
critical resource (Kolk and Pinkse, 2006) such as suppliers sharing knowledge. In terms
of linking supply chain risk and stakeholders, Spekman and Davis (2004) illustrate that
there are six areas of supply chain risk including responding to the corporate social
responsibility requirements of key stakeholders. In this paper, we contend that firms
are pressured by stakeholders to invest in KM to mitigate supply chain risk. While the
above-mentioned studies, among many others, have demonstrated that KM capabilities
can enable a firm to increase its responsiveness to changes in the external and internal
environment, our study contends that a firms KM capabilities can also help a firm
address risk in the supply chain. In turn, effective risk management allows a firm to
respond to changes in customer demand.
This paper examines how stakeholders exert pressure on the firm to mitigate
supply chain risk. In so doing, this paper examines the KM and joint planning
mediating process that enables the firm to mitigate supply chain risk. As such, this
paper builds upon Sarkis et al. (2010) and Hult et al. (2007) by examining how firms
respond to stakeholder pressure by enhancing its KM capabilities across the supply

Supply chain
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203

IJLM
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chain including supply chain joint planning activities. Specific research questions
addressed in this paper are:
RQ1. Does a firms stakeholder pressures influence risk management activities?

204

RQ2. What role do KM processes and joint planning activities with suppliers serve
on the firms ability to engage in risk management activities?

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RQ3. Does the stakeholder and KM process influence a firms demand responsiveness?
To answer these research questions, this paper draws upon stakeholder theory and the
KM literature to develop a nomological model of the determinants of risk mitigations
activities and the influence of these factors on the firms ability to be responsive to
customer demand.
The remainder of this paper is organized as follows. In Section 2, we provide a
theoretical framework and present our hypotheses. Next, we describe the methods
employed in the study and followed by the results of the study. We then present a
discussion of our results followed by the contribution section which highlights future
work in this area.
2. Theoretical background and hypothesis development
2.1 Theoretical foundations: stakeholder theory and KM
Stakeholder theory provides the theoretical framework of this study. Traditionally,
maximizing shareholder value is perceived as the ultimate goal of a company by
economists (Waldman and Jensen, 2001). Donaldson and Preston (1995) point out
that stakeholder theory is used to explain the connections between stakeholder
management and firm performance. Stakeholder theory argues that managers must
take into account the interests of all stakeholder groups who can affect (or be affected
by) the companys activity (Freeman, 1994; Phillips et al., 2003; Sarkis et al., 2010).
Stakeholders include not only shareholders but also any other group related to the
business such as investors, employees, customers, and suppliers (Clarkson, 1995).
Under stakeholder theory, two core questions are articulated by managers: what is the
purpose of the firm, and how does the firm practice responsible management activities
(Freeman et al., 2004)? By answering these two questions, managers may gain a shared
sense of the value they create and the relationships they want and need to create with
stakeholders.
In addition, a firm is often pressured by stakeholders to adopt organizational
strategies. Managers incorporate stakeholder interests into their managerial decision
process (Phillips et al., 2003). For example, the relationship between stakeholder
pressure and environmental practices was investigated by Sarkis et al. (2010).
Moreover, managers are more likely to take actions when they perceive meeting the
needs of stakeholders is important to the organizations survival (Kolk and Pinkse,
2006). Previous studies (Tate et al., 2010; Harrison et al., 2010; Zhu and Sarkis, 2007)
have revealed that initiatives such as a companys environmental practices are
enhanced by either collaboration with or pressure from stakeholder groups. In our
study, we focus on how stakeholder pressure may serve as the impetus to develop
KM and joint planning capabilities with suppliers for increased risk mitigation
activities thereby allowing the firm to effectively respond to demand signals and meet
customer needs.

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In this research, the stakeholder theoretical model is enhanced by integrating

concepts from the KM literature. A key factor that can enable a firm to respond
to stakeholder pressure to engage in risk mitigation activities is knowledge.
Many organizations consider knowledge as a corporate resource that can help the
organization achieve distinctive competencies (Janz and Prasarnphanich, 2003). A firm
needs to ensure that its knowledge assets are used effectively to achieve multiple
objectives including gaining visibility of opportunities to introduce innovations in the
marketplace as well as to respond to potential risks in the external environment.
Hence, it is very important for a firm to acquire, share, and assimilate data and
information with a view to create new knowledge about risks that exist in its supply
chain (Du Plessis, 2007). Stated differently, a firm needs to systematically select, distill,
and deploy knowledge to identify and respond to risks that exist in its supply chain
(Hult, 2003). The following sections discuss the relationships that connect stakeholder
pressure, KM capabilities, joint planning with suppliers, risk mitigation, and demand
responsiveness.
2.2 Hypothesis development
Stakeholder pressure on KM. The first factor in our model is stakeholder pressure.
Stakeholders are both internal and external entities that influence a firms supply chain
policies and practices. One important way that stakeholders exert pressure is by
requiring the firm to adopt certain supplier management practices (Sarkis et al., 2010).
Because stakeholders can become exposed to negative publicity or harm caused by
a firms actions, stakeholders will communicate that the organization should
maintain close management and scrutiny over the firms suppliers. Mattel
Corporations relationship with its suppliers serves as an illustrative example.
Mattel received negative publicity when the public became aware of how Mattels
suppliers were using lead-based paint in some of the firms toy products. Even though
Mattel had previously received praise for its supplier relationship management
activities, the public was infuriated when it became aware that Mattel lost control of
important monitoring and management practices of its supply base. A lack of a joint
planning effort with the supplier in this case resulted in significant financial loss
because Mattel was not closely monitoring supplier activities (Hoyt et al., 2008).
Stakeholders place pressure on the firm to increase its knowledge of activities that
expose the firm to increased risk. Stakeholders can influence the firm to acquire
knowledge on potential risks that its suppliers are taking when manufacturing and
distributing its products (e.g. reviewing quality assessments). Firms can become
responsive to stakeholder demands to become more knowledgeable about its supply
chain practices in several ways. First, the firm can improve its knowledge acquisition
activities. Knowledge acquisition refers to the process by which organizations or
supply chains obtain increased visibility to internal and external forces that could
affect the firms ability to compete in the marketplace (Hult et al., 2007). For example,
executives of a firm need to acquire knowledge regarding the quality performance of
suppliers in order to manufacture a product for the focal company (Kohli et al., 1993).
Therefore, supply chain managers need to acquire knowledge in order to meet
stakeholder mandates of high-quality products that do not compromise the safety of
the firms customers.
Next, the firm can become more knowledgeable about its supply chain processes
by improving achieved memory. Achieved memory is the firms familiarity and
experiences with supply chain processes that can be leveraged for future use

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206

(Hult et al., 2007). It helps a firm to gain a richer understanding of the processes and
operations of its supply chain partners such as suppliers. Stakeholders are increasingly
demanding that the firm have the ability to trace the origins of materials, understand
the nature of production processes, and become knowledgeable about the materials
throughout the supply chain. By leveraging its achieved memory of supply chain
processes, the firm can rapidly detect potential or existing points of failure should a
disruption occur in the supply chain. Higher levels of achieved memory enable the firm
to quickly respond to supply chain risk events.
Stakeholders may also influence the firm to increase its knowledge dissemination
activities. Knowledge dissemination can play an important role in the
communication of historical trends, future needs, and current issues that place
the firms supply chain in a vulnerable position (Hult et al., 2007). Dissemination of
the above mentioned types of knowledge helps a firm to mitigate potential supply
chain risk. For example, a firm can leverage electronic supplier scorecard data to
become proactively alerted to increased variability in replenishment lead times
from its key suppliers. The analysis of historical trend data on supplier lead
time performance should be disseminated both horizontally (e.g. other departments of
the organization) and vertically (e.g. key members of the organization) as a way
for a focal firm to take corrective action against poorly performing suppliers (Kohli
et al., 1993). Therefore, a firm is likely to feel pressure from both internal stakeholders
and external stakeholders to disseminate knowledge regularly so that it can minimize
sources of supplier risk that could negatively impact a firms operational and financial
performance. Because KM includes several dimensions, we present the following
hypotheses:
H1a. KM is positively related to knowledge acquisition.
H1b. KM is positively related to knowledge dissemination.
H1c. KM is positively related to achieved memory.
H1. The greater the stakeholder pressure, the greater the firms KM activities.
KM on joint planning with suppliers. Strong KM practices facilitate the firms ability to
engage in effective joint planning efforts with its suppliers (Rungtusanatham et al.,
2003). Joint planning refers to the coordination/integration required to plan how
existing competencies will be utilized to satisfy the end customer (Braunscheidel
and Suresh, 2009). Firms will use their knowledge about their supply chain processes
to jointly plan and implement with suppliers the means to meet both parties
requirements for an effective sourcing relationship. In fact, many scholars extol the
benefits of jointly planning with a supplier to improve a firms supply chain visibility
through better communication, shared information, and real-time responses to changes
(Das et al., 2006; Devaraj et al., 2007; Flynn et al., 2010; Narasimhan et al., 2010; Primo,
2010; Schoenherr and Swink, 2012; Swink et al., 2007; Frohlich and Westbrook, 2001;
Wong et al., 2011). Firms that work closely with their suppliers, including through joint
planning activities, are able to monitor the status of how and when a product is
manufactured and distributed. In so doing, a firm can decide the appropriate inventory
level by knowing exactly the amount of products that are being produced, transported,
and unloaded. In a supply chain risk context, recent research by Meena et al. (2011)

discuss the importance of joint planning with the supply base in managing risk in the
supply chain. Following this logic, we present our second hypothesis:

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H2. The greater the KM activities, the greater the level of joint planning with
suppliers.
Joint planning with suppliers and value from risk mitigation activities. We now turn
to examining how a firm that jointly plans with its suppliers has greater benefits
stemming from risk mitigation activities. In order to mange supply chain risk, it
becomes critically important for the focal firm to have access to real-time information
about the suppliers operation in order to coordinate between supply chain partners
to meet customer demand. The focal firm will want to continuously evaluate points of
vulnerability in their supplier relationships and risk mitigation plans as a way to
prevent supply chain disruptions from having a detrimental impact. Todays supply
chains are more vulnerable than ever to supply chain risks (Wagner and Neshat, 2010;
Wagner and Bode, 2008) and managing vulnerability is a critical task (Wagner and
Neshat, 2012). Proper sharing of knowledge and joint planning enables the firm to
reduce the supply chains exposure to disruptions (Craighead et al., 2007). Blackhurst
et al. (2011) discuss how sharing of information among supply chain members through
joint planning initiatives could lead to the discovery that a disruption has occurred
allowing for the appropriate mitigation strategy to be implemented. Manuj and
Mentzer (2008a) also note the need for joint planning in order to realize the benefit
of risk mitigation activities. Thus, joint planning activities with suppliers can increase
the value of risk mitigations activities.
Risk mitigation activities provide the firm with a set of strategies and policies that
can be used to eliminate or reduce the exposure to loss in the supply chain. The focal
firm needs to take deliberate action to minimize a disruption from occurring and risk
mitigation is one method that is used to do so. Risk mitigation plans provide the firm
with information that can be helpful in assessing the current level of risk that exists
with the firms supply base. As pointed out in the earlier Mattel example, Mattel turned
to its suppliers for assistance in the contract manufacturing of toys in the market
place. Unfortunately, as it turned out, Mattel did not have an adequate risk mitigation
program in place to prevent the contract manufacturers from using lead-based
paint and as a result a product recall situation occurred. This example points to
the increasing importance that firms need to place on risk mitigation programs as the
organization becomes more tightly integrated through joint planning efforts with
suppliers. Based on the arguments above, we propose the following hypothesis:
H3. The greater the level of joint planning with suppliers, the greater the extent of
risk mitigation activities.
Stakeholder pressure on supply chain risk mitigation activities. We now turn to
discussing how stakeholder pressure directly affects risk mitigation activities. The
growing body of literature on supply chain risk management is still very much
forming and evolving (Sodhi et al., 2012). Nonetheless, firms recognize the importance
of implementing and continuously improving supply chain risk mitigation programs.
Unfortunately, many firms may make only minor or partial investments of time
or resources to manage risk unless pressured to do more by key stakeholders
(Tang, 2006).

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208

A firm may not recognize the benefits from risk mitigation programs unless it is
forced to evaluate and develop an effective supply chain risk mitigation strategy as
stipulated by external or internal forces. Knemeyer et al. (2009) points out that
stakeholders can require a firm to proactively plan for catastrophic risk events. In fact,
Kolk and Pinkse (2006) note the influence of stakeholders should not be underestimated.
However, the benefits of supply chain risk mitigation programs are only recently gaining
increased awareness as firms realize the importance of effectively managing risk in the
supply chain. As a result, a firm may make its initial investment into short-term
and internally oriented risk mitigation activities before it formally develops KM
and supply relationship management capabilities (e.g. directly involving its suppliers in
risk mitigation programs). The firm does so as a way to address pressure from key
stakeholders who want the firm to take immediate action. Based on this logic, we present
the following hypothesis:
H4. The greater the stakeholder involvement, the greater the extent of risk
mitigation activities.
Supply chain risk mitigation activities on demand responsiveness. Recent research has
shown that disruptions or risk events in the supply chain can have an immediate
impact on the ability of a firm to meet customer demand (Juttner and Maklan, 2011).
The agility and responsiveness a firm develops from its risk mitigation strategies
and practices enables the company to respond more effectively to customer demand.
We contend that supply chain risk mitigation activities can enable the firm to become
increasingly resilient and agile. Indeed, Pettit et al. (2010) present a conceptual
framework which suggests that a firm is less likely to become vulnerable to supply
chain risk so long as the firm has implemented management controls and capabilities
to respond to risk events. Risk mitigation activities are one type of management control
that the firm can implement. Risk mitigation activities can enable the firm to become
more responsive to customer demand and in fact Melnyk et al. (2010) and Manuj
and Mentzer (2008b) point out there is a need for supply chains to increase their
responsiveness in order to meet customer requirements. In this paper, customer
demand responsiveness is conceptualized as the ability of the firm to effectively handle
marketplace changes (Braunscheidel and Suresh, 2009) which is critically important to
achieving competitive advantage in the marketplace (Ponomarov and Holcomb, 2009).
In summary, when facing risk in the supply chain, firms must be able to respond
quickly and effectively in order to meet customer needs. We argue that the benefits
firms create in having strong and effective risk management activities will allow the
firm to be responsive to demand changes and ultimately the needs of the customer.
Therefore, we present the following hypothesis:
H5. The greater the extent of risk mitigation activities, the greater the firms
customer demand responsiveness.
Our theoretical model including the hypothesized relationship is shown in Figure 1.
3. Methodology
3.1 Survey development
Our survey design, methodology, and data collection efforts were explicitly implemented
at the firm level. We adopted and adapted survey items from previously published

Knowledge
Acquisition

Knowledge
Dissemination

H1a

Stakeholder
Pressure

H1

H1b

Knowledge
Management

Supply chain
risk and demand
responsiveness

Achieved Memory

H1c

H2

Joint Planning with

Suppliers

H3

Risk Mitigation
Activities

H5

Demand
Responsiveness

209

H4

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Control Variables:
ROA
ROI
HHI
Market Share
Firm Size

studies to form the constructs we used in our model. Additionally, we solicited input and
feedback on the survey items from five faculty and eight supply chain practitioners
(Malhotra and Grover, 1998). On the basis of this feedback, a preliminary version of the
questionnaire was developed based upon the approach that Dillman (2000) recommends.
We pre-tested the survey using six MBA students with supply chain experience and seven
supply chain professionals. In doing so, we were able to confirm the internal reliability
and validity of the survey items.
3.2 Administration of final surveys
The survey was administered by a large public, mid-western university to ensure
data confidentiality. Because recent survey response rates have been low and based
on the recommendations of Dillman (2000, p. 156), we hired and trained college
students to contact by phone potential survey respondents from a list derived from
Dun & Bradstreet (D&B) Corporations mailing list database. In appreciation for
participating in the project, we offered each survey respondent a summary of the
results (Dillman, 2000).
3.3 Sample
The sample for the survey consisted of supply chain management professionals
who are employed in US manufacturing industries. As mentioned above, we chose to
pre-alert 4,456 potential supply chain professional respondents by phone and e-mail
about our survey to address potential survey response rates problems. Of the total
respondent pool, 2,284 supply chain professionals were unable to participate due to
various reasons such as bad contact information provided by D&B Corporation
(e.g. either incorrect telephone number and/or e-mail address), the contact is no longer
employed at the company, or company policy prohibited participation in surveys.
A total of 2,172 potential respondents were e-mailed the survey; 229 respondents
completed the survey for a 10.54 percent response rate (229/2,172). Because we were
able to identify all of the firms in our original sample, we evaluated non-response
bias by comparing financial information of those companies that did not respond to
our survey to those firms which did complete the survey. We found no statistically
significant differences among these groups. Additionally, we evaluated non-response
bias by conducting an early vs late non-response bias test. We found that there are not
any statistical differences among the early vs late respondents on all of the constructs
in our model ( p40.10). We thus conclude that non-response bias is not a serious
concern.

Figure 1.
Stakeholder and risk
mitigation model

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210

Approximately, 50 percent of the survey key informants hold the position of a

supply chain manager or higher; 7 percent are in a supervisor-related position; and the
remaining sample reported to hold an analyst or related position. On average, the key
informant worked for a company that employs 8,651 employees. Industries represented
in the sample include: electronics (35 percent); chemical manufacturing (14.6 percent);
machinery manufacturing (8.5 percent); food, beverage, and tobacco manufacturing
(8 percent); transportation equipment manufacturing (6.5 percent); and the remaining
sample operate in a diverse set of industries including crop production, oil and mining,
paper manufacturing, and other industrial services.
3.4 Measurement of variables
A list of all the constructs used in our study may be found in Appendix A. Our
control variables are derived from the University of Pennsylvanias WRDS
database. We control for the firms relative strength in its industry by using the
Herfindahl-Hirschman Index (HHI) and the firms market share. Relationships and
activities with suppliers may be influenced by the firms relative strength in the
industry or marketplace. For similar reasons, we utilize size of the firm as reflected
by its annual sales as a control variable. Another control variable is the companys
profitability. A firms financial resource base may influence its perception of the value
of risk mitigation activities. A summary of the variables along with the descriptive
statistics is found in Table I.
3.5 Common method bias (CMB)
CMB can be a concern when both the independent and dependent variables are
collected from the same survey respondent (Podsakoff and Organ, 1986). We mitigated
CMB in several ways. First, a Harmans single factor test on all of the measurement
items was conducted (Harman, 1967). If all of the measurement items across the
constructs of interest were to load on one latent factor, CMB would be assumed to be
present. An exploratory factor analysis was performed and the largest factor
accounted for 31 percent of the variance. Second, a latent method factor test was
also conducted. The measurement model contains all of the original constructs plus a
latent method factor (Podsakoff et al., 2003). The results of this latent method factor test
confirm that the item loadings for the factors in our study remain significant, even in
the presence of the single latent method factor (Paulraj et al., 2008; Zacharia et al., 2011).
Additionally, we included secondary data in our model as a way to mitigate CMB
concerns (Boyer and Swink, 2008; Podsakoff et al., 2012). As suggested by Podsakoff
et al. (2003) to mitigate CMB concerns, we used different response format in our survey
measures. Based on the above results, we believe CMB is not of a serious concern.
4. Results
4.1 Analysis of scale measurement reliability and construct validity
We now examine the reliability and discriminant validity of our measures. Table II
shows the reliability values for stakeholder pressure, knowledge acquisition,
achieved memory, knowledge dissemination, joint planning with suppliers, benefits
of risk mitigation activities, and customer demand responsiveness. All of our measures
meet the suggested AVE value of 0.50. Further, all Cronbach a values are above the 0.70
threshold. Overall, our items exhibit good measurement reliability. Discriminant
validity is further examined using the stringent test suggested by Fornell and Larcker
(1981). Demonstrated in Table III, our AVE for each scale is greater than the square of

0.114

0.162 1
0.174 0.229***
1.309 0.102
0.952 0.075
0.684 0.044
0.255 0.086
1.772 0.075
1.352 0.042
1.307 0.024
1.404 0.112

3.934 0.801

0.070
0.166
4.193
3.414
3.430
0.098
0.050
4.872
5.113
5.041

SD

Note: ***Significant at 0.001 level (two-tailed)

Market share
HHI
Stakeholder pressure
Risk mitigation
Demand responsiveness
ROA
ROI
Knowledge acquisition
Knowledge dissemination
Achieved memory
Joint planning with
suppliers

Market
Share

1
0.487***
0.317***
0.123
0.074
0.414***
0.363***
0.385***
0.379***

1
0.004
0.085
0.070
0.016
0.010
0.077
0.091
0.104
0.115

HHI

0.501***

1
0.357***
0.113
0.050
0.456***
0.460***
0.496***
0.430***

1
0.066
0.026
0.465***
0.409***
0.435***

Stakeholder
Risk
Demand
pressure mitigation responsiveness
ROI

0.119

0.083

1
0.383*** 1
0.118
0.046
0.152
0.007
0.084
0.030

ROA

Correlations

0.460***

1
0.799***
0.741***

0.490***

1
0.761***

0.512***

1
1

Knowledge Knowledge Achieved Joint planning

acquisition dissemination memory with suppliers

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Table I.
Descriptive statistics

Achieved memory

Knowledge dissemination

Knowledge acquisition

Demand responsiveness

Risk mitigation

Joint planning with suppliers

Stake1
Stake2
Stake3
JointPlanning1
JointPlanning2
JointPlanning3
RiskMitigation1
RiskMitigation2
RiskMitigation3
RiskMitigation4
DemandRes1
DemandRes2
DemandRes3
KnowledgeAcq1
KnowledgeAcq2
KnowledgeAcq3
KnowledgeAcq4
KnowledgeDis1
KnowledgeDis2
KnowledgeDis3
AchievedMemory1
AchievedMemory2
AchievedMemory3

Stakeholder pressure

Table II.
Reliability
Indicator
0.53
0.87
0.77
0.83
0.87
0.63
0.84
0.91
0.94
0.93
0.59
0.83
0.74
0.78
0.71
0.82
0.87
0.80
0.85
0.68
0.84
0.85
0.77

Standardized
loadings
0.11
0.09
0.10
0.06
0.06
0.08
0.06
0.05
0.50
0.50
0.08
0.06
0.06
0.08
0.09
0.09
0.08
0.08
0.08
0.08
0.08
0.75
0.79

Standardized
error

0.678

0.614

0.634

0.526

0.823

0.616

0.542

AVE

0.698

0.990

0.989

0.992

0.915

0.993

0.981

Construct
reliability

212

Construct

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0.88

0.82

0.86

0.83

0.948

0.902

0.759

Cronbachs
a

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Fornnell and Larker Method

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Joint
Stakeholder planning
Risk
Demand
pressure w/ suppliers mitigation responsiveness
Stakeholder pressure
Joint planning
w/ suppliers
Risk mitigation
Demand
responsiveness
Knowledge
acquisition
Knowledge
dissemination
Achieved memory

Knowledge Knowledge Achieved

acquisition dissemination memory

Supply chain
risk and demand
responsiveness

0.542

213

0.321
0.451

0.616
0.482

0.823

0.252

0.498

0.372

0.526

0.443

0.508

0.44

0.551

0.634

0.283
0.32

0.519
0.546

0.402
0.421

0.532
0.577

0.877
0.787

0.614
0.852

0.678

Table III.
Discriminant
validity analysis

the correlation between the scales. This result provides further evidence of discriminant
validity. Our confirmatory factor analysis analysis reveals good measurement properties
(w2/df 393.62/89 1.874; RMSEA 0.05; CFI 0.959; TLI 0.946; IFI 0.959).
We use structural equation modeling to investigate the hypothesized relationships.
Our control variables are: HHI, firm profitability, firm size, and market share.
Our structural model results demonstrate excellent fit (w2/df 725.764/91 2.116;
RMSEA 0.056; CFI 0.916; TLI 0.901; IFI 0.917). The R2 values can be found
in Table IV.
4.2 Results of hypothesis testing
We now report the results of the testing of our hypotheses as shown in Table V.
As described in Table V, all of our hypotheses are strongly supported at the p 0.01
level. All b coefficients are of the expected sign and significance levels. Further, KM
is conceptualized as a second order construct comprised of knowledge acquisition,
achieved memory, and knowledge dissemination (Braunscheidel and Suresh, 2009).
KM has standardized path weights from itself to the first order constructs and is
statistically significant at the po0.01 level, thus providing support for KM as a second
order construct which allowed us to fully investigate our structural model. The control
variables are not significant except for firm size. We will discuss the implication of
these results in the discussion section.
4.3 Mediation analysis
To further examine the robustness of our results, following the Preacher and Hayes
(2004) mediation approach, we conducted a formal mediation analysis. Utilizing
Structural path
Stakeholder pressure-knowledge management
Knowledge management-joint planning with suppliers
Joint planning-risk mitigation benefits
Risk mitigation benefits-demand responsiveness

R2 values
0.161
0.335
0.336
0.152

Table IV.
R2 values

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214

Table V.
Results

Structural path

Path coefficient

Hypothesis

Finding

Stakeholder pressure-knowledge management

Knowledge management-knowledge acquisition
Knowledge management-knowledge dissemination
Knowledge management-achieved memory
Knowledge management-joint planning
Stakeholder pressure-risk mitigation activities
Joint planning-risk mitigation activities
Risk mitigation activities-demand responsiveness
ROA-demand responsiveness
ROI-demand responsiveness
HHI-demand responsiveness
Firm size-demand responsiveness
Market share-demand responsiveness

0.401***
0.916***
0.951***
0.881***
0.579***
0.349***
0.389***
0.337***
0.065
0.144
0.033
0.093***
0.065

H1
H1a
H1b
H1c
H2
H3
H4
H5

Supported
Supported
Supported
Supported
Supported
Supported
Supported
Supported

(0.075)
(0.298)
(0.659)
(0.204)
(0.082)
(0.080)
(0.065)
(0.063)
(0.323)
(0.047)
(0.494)
(0.033)
(0.514)

Notes: Standard errors are reported in parentheses. ***Significant at 0.01 level

bootstrapping, we measured the indirect effects of the mediated constructs in our model;
namely, KM, joint planning with suppliers, and risk mitigation factors (Preacher and
Hayes, 2004; Jacobs et al., 2007). The indirect effects of the constructs in our model
are statistically significant at po0.05 and the confidence intervals around the indirect
effects did not include zero. Results of the mediation analysis are shown in Table VI.
This indicates that indirect effects are present in our model and confirms that the model is
properly conceptualized (Preacher and Hayes, 2004; Zhou et al., 2011).
5. Discussion
The purpose of our paper is to examine how stakeholder pressure influences a
firms risk management activities. We then examine how this process affects a firms
customer demand responsiveness. We build upon both stakeholder theory and the KM
literature to develop our nomological model. Clearly, supply chains are pressured
from multiple stakeholders to minimize risk because they have a vested interest in
the success of the firm. An important organizational strategy that firms can pursue to
minimize supply chain risk is to mobilize its KM resources which can facilitate
improved collaboration with the firms supply base. In so doing, the firm can become
more responsive to changes in customer demand. Not surprisingly, then, there is
scholarly and practitioner interest in developing a better understanding of how
organizations pursue risk mitigation activities (Manuj and Mentzer, 2008b).
Stakeholder theory and theory from the KM literature is used to examine how firms
respond to stakeholder pressure to mitigate risk in the supply chain. This study presents
a model to explain how stakeholder pressure influences a firm to mobilize internal KM
resources to mitigate risk. By connecting stakeholder pressure with the firms KM
capabilities, we illustrate how stakeholder pressure is an important antecedent in the risk
management process. One opportunity for extending this research is to examine how
stakeholders influence other types of supply chain collaboration activities. Sheffi (2005)
for example, discusses disruption in supply, disruptions in internal operations as well as
disruptions in demand.
We found that stakeholders exert pressure on the firm to increase KM activities.
Stakeholder pressure was found to influence how firms acquire knowledge and
information, how firms assimilate that knowledge and then how firms disseminate or

Knowledge
management
Joint planning w/
suppliers
Risk mitigation
benefits
Joint planning w/
suppliers
Risk mitigation
benefits

Stakeholder
pressure
Stakeholder
pressure
Stakeholder
pressure
Knowledge
management
Knowledge
management
0.276
0.124
0.308
0.397
0.127

0.398**
0.197**
0.407**
0.495**
0.189***

Total effect
Standardized
Lower
estimate
bound

Note: **,***Significant at 0.05 and 0.01 level, respectively

Dependent variable

Independent
variable

0.268

0.591

0.492

0.277

0.5

Upper
bound

0.495**

0.332**

0.398**

0.397

0.239

0.276

Direct effect
Standardized
Lower
estimate
bound

0.591

0.418

0.5

Upper
bound

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0.189***

0.075***

0.197**

0
0.277
0.12
0
0.268

0.124
0.043
0
0.127

Upper
bound

Indirect effect
Standardized
Lower
estimate
bound

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Table VI.
Mediation analysis

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216

distribute knowledge to supply chain partners so that all parties have a richer
undemanding of the information. Acquisition and dissemination of knowledge by the
firm is of critical importance as firms compete in the marketplace. In fact, the enormous
time and effort needed to collect, organize, and process knowledge has been well
documented. Through improved KM practices, the firm will be able to engage in
improved joint planning activities with their suppliers on risk mitigation activities.
We also discovered that there is a strong relationship between the firms joint
planning efforts with its supplier and the firms ability to derive benefits from its risk
mitigation activities. Firms that closely collaborate with the supplier are able to better
understand capacity constraints and have the capability to rapidly re-organize
their manufacturing arrangements to use alternative sources of supply as needed.
Firms who conduct joint planning activities with their suppliers are able to have access
to the information required to help assess the need for risk mitigation programs,
perceive that there are benefits from risk mitigation programs, see potential gains in
implementing risk mitigation programs, and view risk mitigation programs as being
advantageous. In both future research and practice, this has interesting implications
for supplier development programs where a firm may help a supplier develop strong
risk mitigation programs. In turn, the supplier may share risk management best
practices with their own supplier.
Our findings also show that firms which perceive there are benefits from their risk
mitigation programs will become more responsive to customer demand. In the end, this
is the goals of a supply chain: to be responsive to the demand requirements of the customer.
Risk mitigation programs are important to firms that need to bring new products to the
market quickly and safely. Indeed, risk mitigation programs can enable the firm to quickly
switch to contract manufacturing firms when added production and distribution capacity
is needed in situations of unexpected high levels of market demand for the companys
products. The risk mitigation programs can help the firm source, monitor and trace
potential disruptions that could occur in the manufacturing and distribution of products
from points of origin to point of destination. In the Mattel situation described earlier, a risk
mitigation program could have been helpful to the firms executives when a contract
manufacturer was using lead-based paint in the production of a product that was in
tremendous demand. Early detection or warning of the poor manufacturing practices that
was employed by the firms contractor was very much needed.
Our last finding is that there is a direct relationship between stakeholder pressure
and the benefits that a firm derives from its risk mitigation activities. We find that
firms do indeed recognize the benefits of risk mitigation activities. This correlates to
the increased interest and focus on supply chain risk research (Braunscheidel and
Suresh, 2009). Shareholders want firms to become more proactive to gain market
share (or, rather not lose market share in the event of a supply chain disruption)
and differentiate themselves. We found that supply chain risk management offers a
mechanism to do just that. In the short run, firms may pursue risk mitigation activities
without putting into place formalized KM practices and joint planning activities with
their suppliers in response to immediate pressure from stakeholders. However, over the
long run, a firm can implement internal organizational strategies to more effectively
facilitate a firms risk mitigation efforts.
6. Contribution and future research
The purpose of our paper is to examine how stakeholder pressure influences a firms
risk management activities. An important theoretical contribution of our paper is the

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application of KM theory to the topic of supply chain risk. Economists have long
recognized the vital role of knowledge in the design, manufacturing, and distribution
of new products (innovation) into the marketplace. An important characteristic of
markets is the presence of imperfect information. Information is not fully shared within
firms and among firms in the supply chain. Moreover, imperfect information exists
between the firm and their customers. Our study shows that KM theory is informative
to the supply chain risk literature as well. Therefore, we integrate KM theory into our
study to shed light on how KM practices can improve information sharing across
the supply chain to minimize the information asymmetry problems that largely
contribute to poor risk management practices. Future research should examine how
information technology practices and KM systems can be used in tandem mitigate
risk in the supply chain. Indeed, the role of information technology can serve as an
important resource in the rapid acquisition, interpretation, and dissemination of
knowledge across the supply chain to mitigate risk (Spekman and Davis, 2004).
Our research represents one of the first papers to empirically test how stakeholder
theory contributes to risk mitigation activities. Additionally, we show the impact of
KM factors on risk mitigation activities. There has been scant theoretical explanation
on how and why firms are engaged in risk mitigation activity. Our paper attempts to
explain from both a theoretical and empirical perspective how and why firms are
engaging in risk mitigation activities and the impact on demand responsiveness.
While our paper makes several important contributions to the literature, there are
additional opportunities for future research. Our papers theoretical and empirical
focus is on the upstream portion of the supply chain (e.g. suppliers) and the KM and
joint planning issues with them. Clearly, the supply chain also involves customers,
logistics service providers, middlemen, etc. Future research should begin to explore
how KM practices interface with downstream supply chain partners on risk mitigation
activities. Another limitation is that our sample consists of representatives from
multiple levels in their respective supply chain organization. Even though we found
that there are not any statistically significant differences on the key constructs in our
model between key informants who hold a supply chain manager position or higher
level position in the organization compared to those individuals who hold a lower level
supply chain position ( p40.10), future research should evaluate our model using a
more exhaustive sample of senior-level supply chain personnel. We evaluated nonresponse bias using two traditional approaches and found that there were not any
statistical effects. While there are practical limitations with conducting additional
non-response bias tests, in the future, scholars should consider distributing a portion
of their survey to a sample of firms that did not respond to the original survey request
and ask the non-responding firms to complete three to four non-demographic
questions (Wagner and Kemmerling, 2010; Mentzer and Flint, 1997).
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Supply chain
risk and demand
responsiveness
221

Further reading
Cooper, M., Ellram, L.M., Gardner, J.T. and Hanks, A.M. (1997), Meshing multiple alliances,
Journal of Business Logistics, Vol. 18 No. 1, pp. 67-89.
Appendix
Construct

Derived from

Achieved memory: please complete the following set of items by

circling the number that corresponds to your level of agreement on
each of the statements below (1 strongly disagree; 7 strongly
agree)
AC1
We have a great deal of familiarity with our
supply chain partners processes
AC2
We have a great deal of experience with the
organizations supply chain processes
AC3
We have a great deal of knowledge about the
companys supply chain processes
Demand responsiveness: please complete the following set of items by
circling the number that corresponds to your level of agreement on
each of the statements below (1 strongly disagree; 5 strongly
agree)
DR1
Our supply chain is able to respond to changes in
demand without overstocks or lost sales
DR2
Our supply chain is able to leverage the
competencies of our partners to respond to
market demands
DR3
Our supply chain is capable of responding to real
market demand
Joint planning with suppliers: please complete the following set of
items by circling the number that corresponds to your level of
agreement on each of the statements below (1 strongly disagree;
5 strongly agree)
JP1
Joint planning with suppliers is important aspect
of our supply chain activities

(Moorman and Miner, 1997;

Hult et al., 2007)

(Braunscheidel and Suresh,

2009)

(Braunscheidel and Suresh,

2009)

(continued )

Table A1.
Measurement items

IJLM
25,1

Construct
JP2

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222

Table A1.

Information integration with suppliers in the

supply chain is important
JP3
Joint planning with suppliers is an important
supply chain activity
Knowledge acquisition: please complete the following set of items by
circling the number that corresponds to your level of agreement on
each of the statements below (1 strongly disagree; 7 strongly
agree)
KA1
We conduct research with other departments to
determine their future supply chain needs
KA2
We receive feedback from members of our supply
chain (internal and external) at least once a year
which is used to assess the quality of our supply
chain services
KA3
We regularly collect data on trends in the supply
chain environment
KA4
We periodically review the likely effect of
changes in services on members of our supply
chain
Knowledge dissemination: please complete the following set of items
by circling the number that corresponds to your level of agreement on
each of the statements below (1 strongly disagree; 7 strongly
agree)
KD1
We disseminate trends in supply chain
management with other departments
KD2
We spend time communicating and discussing
future supply chain needs with key members of
our organization
KD3
We notify other departments when something
important happens with a key supply chain
member
Risk mitigation activities: please complete the following set of items by
circling the number that corresponds to your level of agreement on
each of the statements below. To what extent does your company:
(1 not at all; 5 extensive)
RM1
Perceive that there are benefits from risk
mitigation programs?
RM2
See potential gains in implementing risk
mitigation programs?
RM3
Believe that risk mitigation programs provide a
long-term opportunity?
RM4
View risk mitigation programs as being
advantageous?
Stakeholder pressure to implement risk mitigation programs: please
assess to what extent your organization feels pressure from the
following stakeholders to implement supply chain risk mitigation
programs (1 not at all; to 7 very strongly)
SP1
Government officials (local, state, or federal)
SP2
Shareholders
SP3
Non-government organizations/society

Derived from

(Kohli et al., 1993; Hult et al.,

2007)

(Kohli et al., 1993; Hult et al.,

2007)

(Kocabasoglu et al., 2007)

(Sarkis et al., 2010)

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About the authors

Dr David E. Cantor (PhD, University of Maryland) is a Deans Faculty Fellow and Associate
Professor of Supply Chain Management in the College of Business at the Iowa State University
in Ames, Iowa. His primary research interest is in supply chain management and information
systems, with a particular focus on the US motor carrier industry. Dr Cantor also is interested
in human decision making in the supply chain. His research on these topics has been published
in many academic and managerial outlets including the Journal of Business Logistics, the
Journal of Operations Management, Decision Sciences, the Transportation Journal,
Transportation Research (Logistics and Transportation Review), the International Journal of
Physical Distribution and Logistics Management and the International Journal of Logistics
Management. Dr David E. Cantor is the corresponding author and can be contacted at:
dcantor@iastate.edu
Dr Jennifer Blackhurst, PhD, is an Associate Professor of Supply Chain Management in the
College of Business at the Iowa State University. She received her doctorate in Industrial
Engineering from the University of Iowa in 2002. Her research interests include: supply
chain risk and disruption; supply chain coordination; and supplier assessment and selection.
Her publications have appeared in such journals as Journal of Operations Management, Journal
of Business Logistics, International Journal of Physical Distribution and Logistics Management,
International Journal of Production Research, and IEEE Transactions on Engineering Management.
She is a member of DSI.
Mengyang Pan is a PhD Student in Operations Management in the Fisher College of Business
at the Ohio State University in Columbus, Ohio. She received her MBA at the Iowa State
University with a specialization in logistics and supply chain management. Her primary research
interest is in operation and supply chain risk management. She is also interested in health
care management.
Dr Mike Crum (DBA Indiana University) is Ruan Chair in Supply Chain Management and
Professor of Logistics and Supply Chain Management at the Iowa State University. He served as
co-editor of International Journal of Physical Distribution and Logistics Management. His current
research interests include supply chain security, transportation safety, and transportation labor.

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Supply chain
risk and demand
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